House votes to extend moratorium on Internet taxes

WASHINGTON -- The House voted Tuesday to make permanent a moratorium that prevents state and local governments from taxing access to the Internet.

Under current law, the moratorium expires Nov. 1, exposing Internet users to the same kind of connection fees that often show up on telephone bills.

"This legislation prevents a surprise tax hike on Americans' critical services this fall," said Rep. Bob Goodlatte, R-Va., chairman of the House Judiciary Committee. "It also maintains unfettered access to one of the most unique gateways to knowledge and engine of self-improvement in all of human history."

The bill is backed by NetChoice, a trade association of online businesses and consumers.

The moratorium was first enacted in 1998. State and local governments that already had Internet taxes were allowed to keep them under the current moratorium.

But under the bill passed Tuesday, those jurisdictions would no longer be able to collect the taxes.

Jurisdictions in seven states tax access to the Internet: Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin, according to the non-partisan Congressional Budget Office. Together they would lose "several hundred million dollars annually" if they were no longer allowed to collect the taxes, CBO said.

Several House Democrats spoke against the bill, but they allowed it to pass on a voice vote, which means members did not record whether they were in favor or against the bill.

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Rep. John Conyers of Michigan, the top Democrat on the Judiciary Committee, complained that cities and states that already tax access to the Internet would lose much-needed revenue under the bill.

"This federal prohibition on state taxing authority is contrary to federalism and the sovereign authority of states to structure and manage their own fiscal systems," said a statement by the National Governors Association.

The bill now goes to the Senate, where it has support from a key Democratic senator.

"The Internet Tax Freedom Act enabled the growth of a flourishing digital economy and hundreds of thousands of new, good-paying jobs," said Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee. "In my view, when you have something that works, that has stood the test of time, you ought to make it permanent."